WASHINGTON (AP) — Six weeks ago, the Federal Reserve unveiled its latest plan to invigorate the U.S. economy. This week, the Fed will likely send a simple message: Give that plan time to work.
No major announcements are expected when the Fed’s latest two-day policy meeting ends Wednesday. Instead, officials will likely affirm their plan to buy mortgage bonds as long as necessary to make home buying more affordable, keep short-term interest rates at record lows through mid-2015 and take other stimulative steps if hiring doesn’t pick up.
Those policies are intended to support an economy that’s shown flashes of strength but isn’t growing fast enough to create many jobs or to increase Americans’ income. The economy grew at a meager 1.3 percent annual rate in the April-June quarter.
Economists think it grew slightly faster in the July-September quarter. Yet many employers remain wary of hiring, in part because of tax increases and spending cuts set to kick in next year and in part because of a slowing global economy.
The $40 billion-a-month in bond purchases the Fed launched last month are designed to lower interest rates and cause stock and home prices to rise, creating a “wealth effect.” When consumers feel wealthier, they’re typically more willing to spend, thereby boosting the economy.
The Fed made clear it would likely hold rates low even after the economic recovery has strengthened. That was a signal that it will keep intervening until the economy grows fast enough to reduce unemployment sharply.
Now, the Fed likely wants to wait to assess the effects of its policies before deciding whether to take further action.